NCLT Kolkata: Dispute On Forgery And Fabrication Of Document Cannot Be Decided By Adjudicating Authority (NCLT) In A Summary Proceeding Under IBC

Background Facts:

Abdul Hannan, the Operational Creditor (Applicant) had provided raw jute to Jai Jute and Industries Limited (Corporate Debtor). Before the issuance of a demand notice, on 17.07.2017, a complaint was lodged against the Applicant and others at the Posta Police Station. The complaint alleged forgery, fabrication of false documents, inadequate supply of raw jute, conspiracy with the Corporate Debtor's employees to produce fraudulent inspection reports, and substandard quality of raw jute.

On 20.07.2017, a settlement agreement was reached between the Applicant Hannan and the Corporate Debtor. Both parties agreed that the Corporate Debtor would pay Rs. 66 lakh to Abdul Hannan in installments over a year from the execution of the settlement agreement, without any interest charges. This settlement agreement was referenced in the complaints filed in 2017. As part of the settlement, the Corporate Debtor possibly issued postdated security cheques to the Applicant.

Consequently, both parties mutually decided that the Corporate Debtor would retract its complaint dated 17.07.2017, against the Applicant, and would not pursue it further. Hence, there were no further actions taken regarding the complaint.

Presently, the Corporate Debtor has an outstanding debt of Rs. 2.16 crores to the Applicant. Aggrieved with this, the Applicant has filed a petition under Section 9 of the IBC to commence the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.

NCLT Verdict:

The NCLT Kolkata dismissed the CIRP application and held that the dispute relating to forgery and fabrication of a document cannot be adjudicated by the Adjudicating Authority in a summary proceeding.

The Tribunal placed reliance on the various decisions of the NCLAT in Radha Exports (India) Pvt. Limited vs. K.P. Jayaram, Jaginder Singh Lather vs. AU Small Finance Bank Ltd., Satori Global Limited v. Shailja Krishna, and Shri T.R. Arya v. Dilawari Motors Pvt. Ltd. wherein it observed that disputes as to whether the documents are forged or have been fabricated cannot be adjudicated by the Adjudicating Authority (NCLT).

NCLT referred to the decision in Mobilox Innovations Private Limited vs. Kirusa Software Private Limited and observed that for the evaluation of an application under Section 9 of IBC, the Tribunal must assess whether there exists an "operational debt" surpassing the specified threshold. Additionally, it needs to ascertain the validity of the documentary evidence accompanying the application that supports the claim of the debt being both due and payable. Moreover, the Authority must determine whether there is a pre-existing dispute between the involved parties before the receipt of the demand notice concerning the unsettled operational debt.

In conclusion, NCLT dismissed the CIRP application and noted that since there are pre-existing disputes between the parties in regard to the supply of goods, the defense claimed by the Corporate Debtor cannot be considered moonshine.

Case Title: Abdul Hannan vs. Jai Jute and Industries Ltd.

Case No.: Company Petition (IB) No. 154/KB/2022 and Interlocutory Application (IB) No. 1209/KB/2023

Counsel for Applicant: Mr. Rishav Banerjee, Adv., Mr. Patita Paban Bishwal, Adv., Ms. Suranjana Chatterjee, Adv.

Counsel for Respondent: Mr. D. N. Sharma, Adv., Mr. Nilay Sengupta, Adv., Ms. Urmila Chakraborty, Adv., Mr. Ankon Rai, Adv., Mr. Sujit Banerjee, Adv., Ms. Ananya Barik, Adv.

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